Rio, Chinalco agree on African joint venture

Mining giant Rio Tinto has signed a non-binding agreement with Chinalco to jointly develop an iron ore mine in Guinea.

The world's third biggest miner says the memorandum of understanding with Chinese government-owned Chinalco covers the development and operation of the Simandou iron ore project, and includes rail and port infrastructure as well as the mine itself.

In return for providing $US1.35 billion of financing to develop the mine, Chinalco would receive 47 per cent of Rio's 95 per cent stake in the project.

That would still leave Rio with a majority 50.35 per cent stake in the project, Chinalco with 44.65 per cent and the World Bank's International Finance Corporation retaining its 5 per cent stake.

Rio Tinto's chief executive, Tom Albanese, says the area has among the world's best undeveloped iron ore reserves.

"We believe the Simandou project is a large scale, long life asset and is the single best undeveloped source of high grade iron ore," he said in a statement.

He also put aside concerns about the ability of Rio and Chinalco to work together, after Rio Tinto last year backed out of a previous agreement with the Chinese company in favour of a deal with fellow Anglo-Australian mining giant BHP Billiton.

"We have long believed that Rio Tinto and Chinalco could work together on major projects for mutual benefit," he said in the statement.

"Chinalco brings its own skills and capabilities in major projects and access to the infrastructure expertise of other Chinese organisations."

The statement also says that the Guinean government holds an option to buy up to 20 per cent of the project, which would decrease the stakes held by the three current partners proportionately if it was exercised.